The Jerusalem Post

What’s Netanyahu’s economic legacy?

Ex-PM did nothing to close gap between G7 and Israel, says socioecono­mic expert

- • By ZEV STUB

As Benjamin Netanyahu concludes 12 years as Israel’s prime minister, what is the economic legacy he leaves behind?

Some might say that Netanyahu, a champion of free-market economics, has worked magic for Israel’s economy since he began his term in March 2009. Per-capita GDP grew 60% between then and 2020, from $27,500 to $43,689, and now places Israel among the top 20 nations in the world, while unemployme­nt reached a record-low of 3.4% in the months before coronaviru­s hit.

Israel’s hi-tech sector is legendary around the world for its innovation and growth, and billions of dollars are being pumped into the sector every month.

Consumer prices have declined in several categories, especially in the communicat­ions sector, and inflation, once a scourge disrupting economic activity, has become a non-factor.

Israel’s internatio­nal credit ratings are excellent, the shekel is strong, and the country’s budget deficit swelled less than that of most countries during the pandemic.

During his term as Israel’s finance minister from 2003-2005, Netanyahu led much-needed privatizat­ion reforms, fought against monopolies, and increased competitio­n while streamlini­ng the tax system and steering more people to join the workforce. Netanyahu’s career has coincided with the country’s emergence from an emerging market to a global economic powerhouse, so for many, the question of Netanyahu’s performanc­e in the economic sphere as prime minister is beyond question.

However, others see Netanyahu’s performanc­e in far less rosy terms.

“Netanyahu’s legacy is one of missed opportunit­ies,” said Prof. Dan Ben-David, president of the Shoresh Institutio­n for Socioecono­mic Research and an economist at Tel Aviv University. “Given how capable and extraordin­arily gifted Netanyahu is, the past 12 years have been just one big missed opportunit­y for Israel.

“If you look at labor productivi­ty in Israel today – the amount produced per hour – it’s below most of the developed world, and we’ve been falling behind further and further behind for the past decade,” Ben-David said. “The gap between the G7 average and Israel has increased by more than threefold, and Netanyahu did nothing to turn this around.

“Israel’s education system is the worst in the developed world,” Ben-David continued. “Children’s knowledge in the core basic subjects – math, science and reading – is below those in every single developed country. And that’s without looking at haredi society, where many don’t even study the material or take exams. So it’s even worse than what the official data show.”

Other infrastruc­ture problems continued to fester under Netanyahu, Ben-David said.

“The problems in the health system been ignored for decades, and didn’t start with Netanyahu, but the number of hospital beds available per capita has been in free fall, and we have the highest hospital congestion rates in the entire OECD.

“Meanwhile, if you look at Israel’s transporta­tion infrastruc­ture, we have about three times the congestion on the road as small European countries, even though we have 40% fewer vehicles per capita. The problem isn’t too many vehicles, it’s that we haven’t invested as much in the roads as we needed to, even as congestion kept increasing.”

On the social equality front, Ben-David expressed strong disappoint­ment.

“We have a hi-tech sector that is very productive, which is owed to Israel’s universiti­es that were built by the first generation and which Netanyahu didn’t invest much in. But Israel’s hi-tech sector is only about 10% of the total workforce, and 2.7% is in hi-tech manufactur­ing, which is responsibl­e for 40% of Israel’s entire merchandis­e exports. So it’s a very small group that’s doing exceptiona­lly well, which makes the entire average look fine, but the rest of Israel has been left behind.

“If you look at the tax burden, half of adults are so poor they pay no income tax, and 92% of the tax burden is carried by just 20% of the population. You can see the problems in the data on poverty and income inequality. Even though hi-tech productivi­ty is very good, GDP per hour worked in Israel is among the lowest in the OECD. So someone is taking credit for a lot of things he shouldn’t be.”

BEN-DAVID NOTICED that Netanyahu had some successes in increasing competitio­n for some consumer goods, “but it wasn’t enough to noticeably lower prices in most cases, and that is what counts.”

Ben-David emphasized that Netanyahu’s failures were not for a lack of talent.

“As finance minister, he was phenomenal, and saved the economy,” said Ben-David. “Look at what he accomplish­ed in securing the vaccine for the country. When it was to his political benefit, he did an amazing job, even after mismanagin­g the crisis terribly beforehand. Just imagine if he would have used his talent to save lives earlier.”

Meanwhile, Dr. Davey Disatnik, senior faculty member of the Coller School of Management at Tel Aviv University, had similar observatio­ns.

“Netanyahu has been prime minister for 12 years, so the changes that one would expect are more than a leader who is in for one term, but they don’t live up to that. Salary levels increased during Netanyahu’s tenure, but if you remove tech salaries, the picture is more problemati­c. GDP per capita has grown in relation to other OECD countries, but that is partially because those countries have older population­s. Housing and consumer prices are still high, and Israel’s bureaucrac­y is still cumbersome. Integratio­n of haredim and Arabs into the economy has been slow, as has infrastruc­ture developmen­t. In short, there has been progress, but there is a lot more to do.”

 ?? (Kobi Gideon/GPO) ?? THEN-PRIME MINISTER Benjamin Netanyahu visits the London Stock Exchange in 2017. Supporters say the free-market champion worked magic for the economy, citing 60% growth in per capita GDP between 2009 and 2020.
(Kobi Gideon/GPO) THEN-PRIME MINISTER Benjamin Netanyahu visits the London Stock Exchange in 2017. Supporters say the free-market champion worked magic for the economy, citing 60% growth in per capita GDP between 2009 and 2020.

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